You Borrow Some Amount of Money for Five Years at a Fixed

Multiple Choice

You borrow some amount of money for five years at a fixed rate of 4%.For the first three years,inflation is 3%,and for the last two years,deflation is 3%.Based on this information,your:

A) real rate of interest was larger than your nominal rate only for the last two years.
B) real rate of interest was larger than your nominal rate only for the first three years.
C) real rate of interest exceeded your nominal rate for the entire five years.
D) nominal rate of interest exceeded your real rate for the entire five years.
E) nominal rate of interest equaled your real rate for the entire five years.